Company up on last year, excluding weather claims and pension costs

Stephen Lewis, Zurich UK chief executive

Zurich’s UK general insurance chief executive Steve Lewis has hailed the company’s “strong underlying results” despite a drop in first-half operating profit.

Group results released this morning revealed a 28% drop in operating profit for UK general insurance. When translated into sterling, the fall was 26% to £52m.

The combined ratio increased 1.1 points to 99.5% from 98.4%. However, Zurich said that increased pension costs and flood claims added four percentage points to the ratio. Stripping out these costs, the combined ratio would have been 95.5% – a 3.3 point improvement on H1 2011’s combined ratio.

The company also said the H1 2012 operating profit would have been higher than the first half of 2011 had it not been for the flood claims and pension costs.

Lewis said: “We are still operating in a very volatile market with challenging economic conditions and tough competition, and it’s a measure of our success that we have achieved strong underlying results against that backdrop.

“We have proved our resilience in the face of a series of flooding events, the squeeze on investment income, and the impact of pension charges, and this puts us in a strong position for the future.”

Gross written premiums were down 3% to £846m. This was mainly caused by an expected drop in personal lines premium “due to business strategy”.

“The business is introducing new propositions and continuing to execute its strategy with a view to supporting premium level stability in this segment,” the company said.

However, Commercial lines broker gross written premiums were up 2% despite underwriting actions to stave off claims inflation and lower investment yields, and Zurich Municipal’s premium volume was up 3%. Zurich said this reflected its continuing focus on providing support to the public sector.